‘Phantom’ towers haunt Sydney’s housing pipeline

An artist’s impression of a mixed-use development proposed for Liverpool years ago.

They’ve been called “phantom” towers – housing projects that exist on paper but have yet to deliver any homes years after getting the green light from councils.

These would-be projects have become a deepening issue, with developers failing to get approved projects off the ground due to rising costs and struggles to obtain financing.

SuburbTrends figures commissioned by MCG Quantity Surveyors have laid bare the problem, with one in six approved unit projects around the country failing to get built – many spread around Sydney.

Many of these projects had stalled after the developers put them on indefinite hiatus, letting the approvals lapse.

Others faced an uncertain future, with approvals renewed but no works commenced after many years.

Mike Mortlock, the director of MCG Quantity Surveyors, said the figures were startling.

“We already know when looking at approvals that we are not even close to where we need to be to meet the national target of 1.2 million new homes in five years, but when you look at completions it’s even worse,” he said.

“There are certain areas where less than 60 per cent of unit approvals are feeding through to completions.”

Approved projects yet to deliver any housing years after getting greenlit from council are numerous.

They include two residential towers of 14- and 20-storeys on Bathurst St in the Liverpool CBD. The towers were approved in 2020 but no works have been commenced yet.

A 25-storey unit tower approved for Granville, but to date not built.

A Granville development on Parramatta Rd is yet to commence after the proposed 373 units were approved in 2019.

Similar projects in the nearby Parramatta CBD remain stuck in limbo after approval was granted in the years between 2020 and 2022.

Housing Industry Association economist Tim Reardon noted these “phantom approvals” were mostly an issue in the multi-apartment construction space, not for houses.

“We are commencing half the number of units as a decade ago,” he said.

Approvals for detached houses almost always resulted in houses getting built because of the different way these projects were financed, Mr Reardon said.

New houses were typically sold first, then approved, then built. With units, approvals came before the projects were actually financed. This meant unit developers were more sensitive to policy changes.

NSW Treasurer Daniel Mookhey unveiled a $1 billion plan in the Budget to address developer financing issues. Picture: Gaye Gerard

Mr Reardon said a key contributor to the phantom approvals issue was increased taxes on foreign investment into new housing projects.

Foreign retirement funds and overseas institutions were a valuable source of financing for new apartment projects in previous years but recent taxes on these groups meant this money had dried up.

“Using foreign capital adds too much to the cost of building and much of that foreign capital is flowing to other countries so, as a consequence, builders have to finance their projects domestically and often they can’t get it.”

But that may soon change.

A $1 billion NSW Budget initiative has been heralded as a potential game changer in addressing the issue and has the potential to break some of the gridlock keeping projects from going ahead.

Building activity has been falling well behind targets needed to address housing shortages.

The Budget measure, termed the Pre-sale Finance Guarantee package, will see government essentially act as a guarantor for certain housing projects.

Budget papers said the scheme will directly add 5000 new homes by going guarantor for developers on unsold properties.

It will also indirectly add 15,000 new homes over the next five years by offering builders the security to start new projects through purchasing unsold stock, according to Budget papers.

Mr Reardon said the new scheme would unlock a “significant” amount of new housing stock.

“This is the first NSW government policy that will meaningfully move the needle on housing supply,” he said.

“Previous intentions and statements were positive but this is the first that will actually materialise in more building.”

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